SIA shares struggle amidst lukewarm MCB rights reception

The carrier saw its shares fall over 2% at the start of the week.

  • Singapore Airlines Ltd (SGX: C6L) share price fell to S$4.94 on Monday (21 June 2021)
  • This came after the group revealed only a 61% subscription rate for its second tranche of rights mandatory convertible bonds (MCBs)
  • Majority shareholder Temasek and its subsidiary Napier Investments took up most of the issuance, with other shareholders subscribing to just 5.32% of the total amount
  • As of May 2021, the group has raised S$15.4 billion, including S$8.8 billion in rights shares and MCBs.
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SIA share price: What’s the latest?

Singapore Airlines (SIA) shares fell 2.2% after revealing that its latest tranche of MCBs was undersubscribed.

The group received valid acceptance and excess applications for a rough aggregate of S$3.76 billion in principal amount of rights MCBs, as at the close of the rights issue on 16 June 2021.

This represented approximately 60.6% of the S$6.2 billion in aggregate principal amount of MCBs available under the rights issue.

Of this amount, S$3.43 billion came from the group’s majority shareholder Temasek and its wholly-owned subsidiary Napier Investments Pte. Ltd.

This means other shareholders took up just S$0.33 billion of the total principal amount available, representing 5.32% of the entire tranche.

The remaining S$2.44 billion will be procured by Tembusu, also a subsidiary of Temasek.

This batch of rights MCBs is expected to be credited to the securities accounts of depositors and scripholders on or around 24 June 2021.

SIA further expects that the 2021 MCBs will be listed and quoted on the main board of the SGX-ST on or about 25 June 2021 and trading of the securities will commence with effect from 9.00 a.m. on the same day.

SIA confident that it has enough cash

Earlier this month, the national carrier was asked by the Securities Investors Association (Singapore) whether it had thought of delisting its stock.

SIA replied that it expects the S$6.2 billion raised through MCBs, along with existing cash reserves, to ‘sufficiently cover’ its financial needs ‘well into’ the fiscal year ending March 2023.

The airline also noted that ‘privatisation is not a matter for SIA to consider as it is a shareholder action’, thus the company is ‘not in a position to comment’.

Analysts told The Straits Times that if a privatisation were ever contemplated, such an exercise can only be done with the approval of Temasek.

As of 19 May 2021, the group has raised S$15.4 billion since April 2020, including S$8.8 billion in rights shares and MCBs.

How do analysts rate the SIA stock?

The blue-chip counter is up roughly 17.4% year to date. Latest analyst sentiments published by SGX StockFacts show a consensus rating of ‘underperform’ and average target price of S$4.38.

The target price equates to a 12.7% downside potential from the stock’s last traded price of S$5.02 on Tuesday (22 June).

Credit Suisse analyst Louis Chua rated SIA shares ‘underperform’ with a S$3.40 target price in late-May, while Morgan Stanley’s Divya Gangahar Kothiyal gave an ‘equal-weight / in-line’ rating alongside a S$4.95 target.

Meanwhile, OCBC researchers downgraded their rating on the stock to a ‘hold’ and price target to S$4.75 from S$4.80 previously.

More optimistic were CIMB brokers, who increased their rating to ‘add’ alongside a lower price estimate of S$5.64 (from S$6 previously).

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